When Dell announced its planned $67 billion acquisition of storage giant EMC, one person couldn’t wait to come out as a naysayer: Hewlett Packard Enterprises CEO Meg Whitman.
She immediately sent an email to her troops pointing out what she described as the downsides of the merger and claimed that her new company, HPE, was “two years ahead of the game and it will be difficult for others to catch up.”
It’s hard to see HPE as ahead of the game when it’s been in the middle of a years-long painful restructuring, splitting itself in two, with shrinking revenues and massive layoffs.
So on Tuesday, after HP reported its last ever earnings as a consolidated company, she explained to analysts what she meant:
We feel really good about our strategy relative to what we see Dell and EMC doing. They could not be in more stark contrast. They’re getting bigger, leveraging up, and doubling down mostly on legacy technology. While our strategy is to get smaller. I’ve just spent the last four years de-leveraging the balance sheet and leaning into new technology, like converged infrastructure, new server architectures, 3Par with all flash [enterprise storage], Aruba, etc.
To decode that a little, “leveraging” refers to the debt on the balance sheet that helped finance mergers. When Whitman took over HP, it was in the middle of a leveraged acquisition hangover, particularly the disastrous $11 billion deal for Autonomy.
Dell is expected to have about $50 billion of debt on its books if its deal for EMC goes down as planned.
By “legacy” technology she means the old school computer servers and storage systems that are being eaten by newer alternatives, like new forms of computer servers and storage systems. Then again, most of that is being eaten by public cloud computing from Amazon Web Services, Microsoft and a few others. And that’s an area where neither HPE nor Dell has game. (Whitman closed its public cloud and just announced a partnership to sell Microsoft’s cloud.)
Whitman has a unique insight into the Dell/EMC deal. HP was reportedly trying to be the one to buy EMC, but the talks died when they couldn’t agree on price.
She says that she’s still willing to buy the tech she needs, if HP can’t first create it in-house or partner for it. But Whitman told analysts, she’s looking at much smaller deals “along lines of a 3Com, 3Par, or Aruba acquisition.”
All of those deals were below $3 billion, and Whitman seems to be suggesting that now that HPE is smaller, it’s not going to answer the Dell/EMC deal with some huge deal of its own.
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